By the end of the first quarter, SmartCap has selected two of the strongest private fund management candidates to manage green technology venture capital funds, and it is expected that agreements will be concluded in the second half of this year after additional due diligence process and negotiations of the investment terms.
At the same time, the direct investment proposals of SmartCap Green Fund are analyzed. The initial investment decisions have been made and the investment terms are being negotiated.
Last year a call was announced to select two private fund managers for the two greentech venture capital funds to be created, and by the beginning of this year a total of six applications were received. In the first quarter, SmartCap has analyzed the proposed greentech fund proposals investment opportunity and compliance with the call terms, including the team’s background and experience, investment strategy and conditions. Two qualified managers with the greatest potential have been selected, whereas the due diligence process is ongoing.
The goal is to sign investment agreements by autumn. SmartCap makes a cornerstone investment of 20 million euros in both funds, which are to support early-stage Estonian green technology companies with high growth potential.
Green investments remain attractive
The succesful private fund managers will continue to raise money from private investors to green technology venture capital funds. Green technology funds can start investment activities if the minimum necessary contribution from private investors is available, which in turn depends on the ability of private fund managers to raise money as well as on the general market situation. Despite the increase in the cost of capital and the conservative attitude of investors over the past year, the technologies and investments contributing to the green transition should remain attractive.
In parallel with the selection process of green technology investment funds, SmartCap is investing directly from SmartCap Green Fund to greentech startups. There has been a lot of interest towards the direct investments and the first startups have received the initial investment decisions. SmartCap investment team analyzes the investment proposals and conducts to suitable investment opportunities/ startups the due diligence and negotiates the investment terms. At the same time, work continues both with new startups and with those in more advanced stages of the investment process. The direct investments will be announced as soon as the startups reach the minimum required contribution from private investors and the investment agreements have been negotiated and agreed with the lead investor and SmartCap. Presumably, the first investments will be revealed this summer.
Up to 20 million for direct investments
A prerequisite for receiving an investment from SmartCap Green Fund, in addition to the ability to attract money from private investors, is a clear focus on innovative and/or research- and technology-intensive green technologies. The purpose of direct investments is to invest into early-stage Estonian startups that develop breakthrough technologies, products, or services able to contribute to achieving a climate-neutral circular economy and solving environmental problems. Until the end of 2024 SmartCap has allocated from SmartCap Green Fund for direct investments in total of 20 million euros.
This year, a new initiative in SmartCap’s portfolio is the participation in the creation of the NATO Innovation Fund. Through SmartCap Venture Capital Fund, the state invests nearly 30 million euros in the NATO Innovation Fund, the purpose of which is to create and finance new startupsdeveloping dual-use technologies, that is civilian and military, use. Currently, together with partnering countries, the conditions of the fund are being developed and the cooperation model is being designed, and the launch of the fund is expected to take place this summer. The total volume of the NATO Innovation Fund will be 1 billion euros.
Further information:
* Information about the Green Fund’s direct investment program is available here.
* Information about the Green Fund’s investment fund management contest can be found here.
* More information about the NATO Innovation Fund can be found here.
SmartCap’s Green Fund is financed by the European Union from the resources of the NextGenerationEU (RRF) recovery instrument.
